Complaint No C18232 [2018] NZREAA 20 (15 January 2018)

New Zealand Real Estate Agents Authority

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Complaint No C18232 [2018] NZREAA 20 (15 January 2018)

Last Updated: 22 June 2018

Before the Complaints Assessment Committee

Complaint No: C18232

In the matter of

Part 4 of the Real Estate Agents Act 2008

Licensee 1: Licensee 1 (XXXXXXXXX)

Decision to take no further action

15 January 2018

Members of Complaints Assessment Committee: CAC412

Chairperson: Bernardine Hannan

Deputy Chairperson: David Bennett

Panel Member: Craig Edwards

Complaints Assessment Committee

Decision to take no further action

1. The Complaint

1.1. On 9 January 2017 the Real Estate Agents Authority (the Authority) received a complaint against the Licensee from the Complainants.

1.2. The Licensee is a licensed Salesperson under the Real Estate Agents Act 2008 (the Act).

1.3. The complaint relates to a property (the Property).

1.4. The details of the complaint are that the Licensee misled them that they could legally live in the Property when this was not permitted because of the commercial zoning.

1.5. In particular, the Complainants advised that:

a) The Property was marketed as a “Small Business Unit ...” and was described as having “roller door access on the ground floor with warehouse/workshop space and living or office space above”.

b) They told the Licensee they intended to operate a part time business and live at the

Property and he did not advise them that living at the Property was prohibited.

c) The Licensee did not disclose a failed resource consent application by the Body Corporate seeking to permit residential use or a letter that had been sent to the vendor by the Council requiring residential use to cease by 6 October 2016.

d) After the sale the vendor had told them that he had provided information about the failed consent application to the Licensee.

e) The Complainants has suffered severe financial loss and have been told they are unable to live at the Property.

1.6. The Complainants requested a remedy, being:

a) Compensation payable to the Complainants for the difference between the amount the

Complainants paid for the Property ($322,000) and another recent sale ($299,000) being

$23,000.

1.7. The Licensee responded to the complaint against him.

1.8. In particular, the Licensee commented that:

a) The Property was listed for sale in the commercial sections of property websites.

b) The Licensee had a conversation with the vendor on 2 June 2016 in which the vendor affirmed that a purchaser could live there if they were also working there.

c) The building Compliance Schedule stated that the current lawful use for the property was

"Accommodation, Commercial”.

d) At the viewing on 9 August the Licensee told the Complainants that the Compliance

Schedule inferred that they could live and work in the Property but that they would need to obtain independent advice. The Licensee also informed them that the tenant currently residing at the Property was doing so for residential purposes only and was not allowed to do so.

e) The Licensee only became aware of a letter sent to the vendor by the Council, requiring residential use to cease, after the sale.

2. What we decided

2.1. On 9 May 2017 the Complaints Assessment Committee (the Committee) considered the complaint and decided to inquire into it under section 79(2)(e) of the Act.

2.2. On 22 November 2017 the Committee held a hearing on the papers and considered all the information gathered during the inquiry.

2.3. The Committee has decided to take no further action on the complaint.

2.4. This decision was made under section 89(2)(c) of the Act. The decision was also made with reference to the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012. 5.1 (skill, care and competence), 6.2 (act fairly and in good faith), 6.3 (not bring industry into disrepute, 6.4 (not mislead or provide false information), 10.7 (disclosure of defects).

3. Our reasons for the decision

The Committee concluded:

3.1. The issue for the Committee in this case is whether the Licensee misled the Complainants about the situation regarding living at the Property and whether the Licensee ought to have known about, and disclosed, information about the unsuccessful application to change the permitted use of the Property to residential and a Council requirement that existing residential use cease.

3.2. In this case there is insufficient evidence to convince the Committee, on the balance of probabilities, that the Licensee misled the Complainants or that he had, or should have discovered and disclosed specific information about the declined resource consent application and Council letter to owners.

3.3. The situation around living in a commercial zone in premises designed for mixed use is clearly complex with potential for confusion. The vendor it seems maintains the view that it is legal to live in the Premises provided the resident is also working or operating a business from the address. Despite the failed attempt to gain consent for unrestricted residential use, no compelling evidence has been presented to this inquiry to establish that the vendor’s opinion on this matter is ungrounded.

3.4. Moreover, this is not the issue the Committee is being asked to determine. Rather, the Committee must determine if the Licensee’s conduct in these circumstances is unsatisfactory and in particular, if the Licensee misled the Complainants by act or omission. In this regard, the Committee is not satisfied that this standard has been breached for the following reasons.

3.5. The Committee is satisfied that the Complainants understood that the Property they were purchasing was commercial in nature and very different to a residential home or apartment. The Committee forms this view for the following reasons.

3.6. The Property was marketed in the commercial section on a property websites and would not have appeared as a return to searches usually being made by buyers seeking an apartment or residential home. All negotiations for the sale and purchase were conducted on a plus GST basis which is common for commercial purchases but would be viewed as unusual in a

normal residential property transaction. The Complainants expressed their intention to the

Licensee to operate a part time business from the Property. The Complainants was also provided with the Compliance Schedule that listed the Property’s use as mixed use Accommodation and Commercial.

3.7. Although the Complainants was aware of the nature of the Property the Licensee still had an obligation not to mislead the Complainants about matters relating to zoning and potential

use of the Property. In this regard, the Committee does not form the view that the Licensee’s

conduct fell short of the standard required for the following reasons.

3.8. There is no significant difference of opinion between the parties as to what the Licensee told the Complainants about the Property. The Licensee was advised that it was not legal for someone to live at the Property unless they were operating a business from there. The Licensee maintains that they had told the Complainants this and specifically that the tenant at the time was not permitted to live there as they were not operating a business.

3.9. The issue for the Committee to determine is whether the Licensee knew about or ought to have done more to discover and disclose information about unsuccessful proposals to change the permitted activity to residential and the Council letter requiring existing residential use to cease.

3.10. There is conflicting evidence as to whether the vendor had told the Licensee about the unsuccessful consent application and Council letter. Certainly, the evidence supports the view that other agents marketing the Property were aware. The vendor believes he did tell the Licensee although there is no corroborating evidence of this in email transcripts or the information on the Licensee’s files. The Committee therefore cannot establish, on the balance of probabilities, that the Licensee was aware of the unsuccessful consent application and Council letter.

3.11. Had the Licensee been aware of this information then it is possible the Committee might have formed a different view on this matter. However, it cannot be established that he was aware. Further, the Committee does not believe the existence of a failed application for a change of use consent can be considered a hidden or underlying defect about which the Licensee should have been alert to the risk of, and therefore had an obligation to warn the Complainants about under Rule 10.7 (hidden defects).

3.12. The Committee has considered that the information the Licensee provided the Complainants relating to use of the Property was consistent with the status quo and was appropriate and enabling for the Complainants to undertake their due diligence. Had an application for a significant change to the permitted activity been achieved it would be expected this information would have been supplied to the Licensee and brought to potential purchaser’s attention. Failure for this to occur, had such a situation occurred, is likely to have been viewed by the Committee as more concerning. A competent Licensee would be expected to

anticipate that a significant change to the permitted activity may have significant implications that buyer’s attention should be specifically drawn to.

3.13. The Committee is therefore satisfied that the Complainants was aware of the Property’s commercial nature and was not misled in this regard. The Committee is also satisfied that the Licensee did not mislead the Complainants or withhold important information. The

Committee is also satisfied that it is not the Licensee’s role to advise on complex local authority and regulatory requirements as they related to the Complainant’s intended use of the Property and that he had advised the Complainants to seek independent advice.

4. Your right to appeal

4.1. If you are affected by this decision of the Committee, you may appeal in writing to the Real Estate Agents Disciplinary Tribunal (the Tribunal) within 20 working days after the date of the notice given of this decision (Section 111).

4.2. For further information on filing an appeal, read Guide to Filing an Appeal at Mi ni stry of

J usti ce -Tri bunal s ( ww w. justi ce. g ov t. nz/ tri bunal s ).

5. Publication

5.1. At the Committee’s discretion, the decision will be published without the names or identifying details of the Complainants (including the address of the Property), the Licensee and any third parties.

5.2. The Authority will publish the Committee’s decision after the period for filing an appeal has ended, unless the Tribunal receives an application for an order preventing publication. The Authority will not publish the Committee’s decision until the Tribunal has made a decision on the application.

5.3. Publishing the Committee’s decision supports the purpose of the Act by ensuring that the disciplinary process remains transparent, independent and effective. The Committee also considers that publishing this decision helps to set industry standards and that is in the public interest.

Signed

Craig Edwards

Panel Member

For Complaints Assessment Committee 412

Real Estate Agents Authority

Date: 15 January 2018

Appendix 1: Relevant provisions

The Real Estate Agents Act 2008 provides:

79 Procedure on receipt of complaint

(1) As soon as practicable after receiving a complaint concerning a licensee, a Committee must consider the complaint and determine whether to inquire into it.

(2) The Committee may—

(a) determine that the complaint alleges neither unsatisfactory conduct nor misconduct and dismiss it accordingly:

(b) determine that the complaint discloses only an inconsequential matter, and for this reason need not be pursued:

(c) determine that the complaint is frivolous or vexatious and not made in good faith, and for this reason need not be pursued:

(d) determine that the complaint should be referred to another agency, and refer it accordingly:

(e) determine to inquire into the complaint.

89 Power of Committee to determine complaint or allegation

(1) A Committee may make 1 or more of the determinations described in subsection (2) after both inquiring into a complaint or allegation and conducting a hearing with regard to that complaint or allegation.

(2) The determinations that the Committee may make are as follows:

(a) a determination that the complaint or allegation be considered by the Disciplinary

Tribunal:

(b) a determination that it has been proved, on the balance of probabilities, that the licensee has engaged in unsatisfactory conduct:

(c) a determination that the Committee take no further action with regard to the complaint or allegation or any issue involved in the complaint or allegation.

(3) Nothing in this section limits the power of the Committee to make, at any time, a decision under section 80 with regard to a complaint.

111 Appeal to Tribunal against determination by Committee

(1) A person affected by a determination of a Committee may appeal to the Tribunal against a determination of the Committee within 20 working days after the date of the notice given under section 81 or 94.

(2) The appeal is by way of written notice to the Tribunal of the appellant's intention to appeal, accompanied by—

(a) a copy of the notice given to the person under section 81 or 94; and

(b) any other information that the appellant wishes the Tribunal to consider in relation to the appeal.

(3) The appeal is by way of rehearing.

(4) After considering the appeal, the Tribunal may confirm, reverse, or modify the determination of the Committee.

(5) If the Tribunal reverses or modifies a determination of the Committee, it may exercise any of the powers that the Committee could have exercised.

The relevant provisions from the Real Estate Agents Act (Professional Conduct and Client Care) Rules

2012.

Rule 5.1 A licensee must exercise skill, care, competence, and diligence at all times when carrying out real estate agency work.

Rule 6.2 A licensee must act in good faith and deal fairly with all parties engaged in a transaction.

Rule 6.3 A licensee must not engage in any conduct likely to bring the industry into disrepute.

Rule6.4 A licensee must not mislead a customer or client, nor provide false information, nor withhold information that should by law or in fairness be provided to a customer or client.

Rule 10.7 A licensee is not required to discover hidden or underlying defects in land but must disclose known defects to a customer. Where it would appear likely to a reasonably competent licensee that land may be subject to hidden or underlying defects4, a licensee must either—

(a) obtain confirmation from the client, supported by evidence or expert advice, that the land in question is not subject to defect; or

(b) ensure that a customer is informed of any significant potential risk so that the customer can seek expert advice if the customer so chooses.